In front of us is the NASDAQ 100. So the NASDAQ 100 monthly timeframe. If consolidation forms, we should have that 4000 tick push or continuation of the push, which is equivalent to $20,000 US dollar opportunity trading with the e-mini contract or $2000 US dollars trading with a micro e-mini contract. So what we have to do is talk about
- What’s going on with the structure?
- What should we look for to minimize as much risk as possible?
Let’s start out with a monthly timeframe, simply because on the monthly timeframe, we tend to find direction a little bit easier.
What I mean by that is you’re not really dealing with a lot of market noise when you look at larger timeframes and what’s the market noise? My opinion, market noise, just quick movements, false movements, false reversals, 100 tick move up and then 100 tick move down very quickly. Those are usually driven by fundamental announcements, big positions entering in or exiting, unscheduled speeches, stuff like that. An economic disaster, someone says this, someone says that type of scenario. That I call that noise. Scalpers and day traders got to really stay on top of that because it can really hurt their positions, but usually position traders don’t. Position traders, what they do is they look at a larger timeframe and this scenario, monthly timeframe, and then they make the decision up or down based upon direction. Now, when I say direction, I’m referring to, if we were to buy the mark and a walk away for months at a time, would the market slowly drifted away.
Or if we were to sell the mark and walk away for months at a time, would we slowly drift away? We can’t answer that question. In my opinion, you lose the power of direction and direction is really what gets a lot of people at the edge of success over time, which is the most important thing outside of risk management.
So what do we have with the NASDAQ?
We have this up channel where the mark has been bouncing between the bottom blue level and the top blue level multiple times. Well, in July, the market closed and the buys zone to the market surge, right, to the Fibonacci extension of the 1.618, which is 12199.0. Hit resistance came to the backside. Now this is key, markets usually U-turn out on and or around the same price point, so the top of resistance, which been U-turning the market since 2016 area about a five calendar year U-turn level, the market formed a low specifically, right at the backside of that angle, which leads me to believe that support is holding the mark and they rally back up.
Now leading up to the election we’ll probably consolidate in this low area, so I’m going to go to the smaller timeframe and look for that consolidation range. And we’re going to go to the monthly timeframe and here’s on the, I’m sorry, the daily timeframe. On the daily timeframe, I want you to see this. So let me go ahead and move this out of the way. There’s really four rules that I like to follow that really keeps me sane. And what I mean by that is in trading, the market can only go up and the market can only go down. And because it can only go up because it can only go down, you’ve got a 50/50% chance of being right or wrong if you simply guess. I follow four simple rules that helped me be right more than half the time by default, as long as I follow these four simple rules, at least that’s the goal.
Follow these simple rules
Number one, buy low in the buy zone. Number two, sell high in the sell zone. Number three, do not buy future high prices. Number four, do not sell future low prices. I get made fun of about these rules all the time because they’re simple, but I do use them pretty much every single day to guide me in my decisions. So since the market, since March on the way up, you can see the market’s been at this U-turn level. We’ve been buying low in the buy zone. Low, low, buy low, buy low, buy low, buy low. But then the market recently broke this up angle and we entered into the cell zone.
Well, now we’re at the backside of the angle. See this angle we’re here? See that? We’re that backside of this trend line. Very important, because let me tell you this, in trading, in my opinion, it’s kind of like business a little bit, like what’s the role of the presidents of a company. 95% of what they do a well educate high schooler can realistically accomplish, but it’s that 5% experience of making decisions when it really matters is what separates people, different presidents and different companies. Same thing with traders.
95% of what we do, a well-educated high schooler could do. Heck, a middle schooler could do it. But it’s the 5% decision-making. So for example, when the market’s above this blue line buying low is simple, anybody can do that. Middle schoolers can do that, et cetera. But it’s when we’re in this area here, when the market breaks the up angle is at the backside of the angle, and then you have to say to yourself, okay, do I sell or do I buy? Well, here’s the experience, here’s that 5% experience. The monthly timeframe hit the back side of resistance becoming support, which means support has held. When you go to the daily timeframe, this low is that monthly support level. So that low right there, even though it’s in the sell zone, it’s the backside of support off of the monthly timeframe, which has been U-turning the market for five calendar years.
This means that more than likely this channel, this has what’s called a shifting of channel effect, where it would make higher highs and higher lows above this blue line. And all it did is the channel shifted, it fell down and it can still make higher highs and higher lows just below the channel. So that’s what I’m going to be looking out for. I’m going to expect that the NASDAQ’s going to fall a little bit and I’m expecting a low to form higher than this low, and then a rally towards the North. So I like to go to the monthly time before direction and direction is up. So once again, the monthly timeframe says direction is up.
Wait for the daily low price
We’re going to expect a 4,000 take rally towards 1219950, that’s consolidation range. We’re hitting the backside of the channel. Daily timeframe, I look for low prices. If direction is up, I wait for a daily low price, because I know if I can get a daily low price, I can have a multi-day bullish run. So I’m going to be waiting for this market to retrace just a little bit so I can get a daily low. So when I start to buy the market, I can get a two-day run, three-day run, five-day run, et cetera. Now I don’t want to buy too early so I go to the one hour timeframe for the zone. And on my one-hour timeframe, look what I have. I have an up channel already starting to form. Support, resistance, support, resistance.
This move is a 2000 tick movement, it’s $10,000 with e-mini contract because every ticks worth $5 in e-mini contract or $1000 for every micro. So basically what we’re doing here is we’re buying counter-trend line breaks at the bottom of support and closing out 50 ticks below resistance. Trying to go after that 2000 tick movement, which is $10,000 here, $10,000 here. Which means I’m waiting for this market to come near, give me that low price. So realistically today, tomorrow, and then probably Wednesday, we’ll be right around this area. And I’m going to look for a counter in line break bullish. I’m looking for a 2000 tick rally on the way up. Now notice what I said, I said I’m waiting for the low price to look to buy, I am not selling right now. Novice traders, what they like to do is they’ll see the highs and they’ll sell it on the way down.
It’s like driving a car
For me, I look at this like driving a car, right? If we have a one-way street, we’re going up one way, I only like to drive with traffic. I don’t like to drive against traffic. So if the direction is up, I only like to buy low prices, I do not like to sell these high prices first. So I have two plans. I have plan number one, if the market falls near the bottom support, I’m going to be looking to buy it for 2000 ticks, nearly $10,000 in return with an e-mini or $1000 US dollars return with every micro. Or the market does rally early, and we look to buy the backside of the angle. Now that backside of the angle is a pretty powerful angle because it’s been U-turning the market since March of 2020. So you can see here this blue line, U-turn, U-turn, U-turn, U-turn, U-turn, U-turn as a pretty powerful blue line.
And so if this market rallies or breaks that level, I’m not going to be overly upset about it, I’ll just let it rally without me first and then I look to buy the backside of it. So once again, I’m looking for or low price at a known level U-turn in the direction of the trend. So I like to use the monthly time for direction. Direction says we’re going up. I like to use the daily time for low prices. Right now, we’re coming off of the low price, I would like the daily time frame to kind of test it. Give me a little bit lower price so that when I enter in, I can have a multi-day follow-through. Then I use the one hour time to confirm the zone. I have enough channel in my one hour timeframe. If we give me a low price contract line break, I’ll put my stop just below the upper channel, and that will limit out at the top of the channel.
If for whatever reason the market gives me the entry above the channel, I’ll probably more than likely look for the buy all the way to 12199.50. Either way, it’s 2000 ticks of opportunity, either way it’s $10,000 with e-mini or $1000 US dollars with a micro. I know we kind of went into a little bit more detail, we went into a little more advanced information, but if you’ve been watching this information up to this part, I think that everything’s started to make sense.
